How student loans can impact home buying

Ready to buy a home? Many people think the biggest challenge for young homebuyers is coming up with the funds to buy their dream home. But there's a new challenge for would-be homebuyers who do make enough money, but have significant college loan and grad school debt. This debt-to-income ratio is becoming a common roadblock to home ownership.

So, if you have student loan debt, how can you prepare to buy a house?

Pay down the debt as much as possible.

Lenders do not count debt against you as a potential borrower when you have less than 10 payments left on the loan.

Involve a family member in the mortgage process.

A financial gift towards a home's down payment can reduce the total amount you need to borrow.

Get a cosigner.

Standard FHA loans allow a non-occupant co-signer, so if your parent or relative is willing to cosign the loan, it can help increase their debt-to-income ratio and better your chances of obtaining a mortgage.

Buy with a friend.

If you don't have the finances to obtain a mortgage on your own, pairing up with a friend may increase your chances of obtaining a mortgage - assuming you both don't have considerable college debt. This should be a well-thought out decision, but for some buyers it can be a viable solution.

To get a fair assessment of your financing options, it's most important to have an in-depth discussion with a lender up front. TD Bank's recent Mortgage Service Index found that buyers who had open communication and regular, in-person discussions with their lender during the mortgage process had a more positive home buying experience overall. So choose a lender that is available and ready to work with you. If you have questions or are ready to begin, call one of our mortgage experts today at 1-866-325-4516 or you can read more about the TD Bank Mortgage difference.

Malcolm Hollensteiner. Mortgage 101: Student Loans Standing in the Way of Home Buying for College Grads. N.p. Unknown. N.d. October 2013.

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This article is based on information available in October 2013. It is for general informational purposes only. It is not intended to provide specific financial, investment, tax, legal, accounting, or other advice and should not be acted or relied upon without the advice of a professional advisor. A professional advisor will recommend action based on your personal circumstances and the most recent information available.

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